Canada to phase out home mail delivery to cut big losses

OTTAWA (Reuters) - Canada’s postal service will phase out urban home delivery within five years and hike the cost of postage stamps to try to stem soaring losses, the post office said on Wednesday.

Canada Post, like the U.S. Postal Service, is suffering as customers switch to digital communications. In August it said it was on track to run short of cash by the middle of 2014 unless major changes are made.

The government-owned corporation - which has a mandate to be self-financing - last month reported a third-quarter loss of C$109 million ($103 million) before tax and said mail volumes had fallen 7.3 percent from the same period in 2012. It must also deal with a C$6.5 billion deficit in its pension plan.

About 5.1 million urban households - a third of the total - get door-to-door mail delivery. Under a five-point plan unveiled on Wednesday, this will be phased out over the next five years and replaced by a system of community mail boxes.

“With the ongoing decline in letter mail - we delivered a billion fewer pieces of mail in 2012 than we did in 2006 - we had to make changes,” spokesman Jon Hamilton said.

“(This plan) really provides Canada Post with a future based on serving needs that Canadians have rather than trying to put something together than doesn’t work.”

But the main postal workers’ union, the Canadian Union of Postal Workers, said the “shortsighted and foolish” changes would cripple the mail service and called on Canadians to oppose the move.

The official opposition New Democratic Party (NDP) said the changes could harm pensioners who rely on home delivery in winter months.

“There is no doubt there are negative impacts on service across the country,” said NDP legislator Peter Julian.

JOB CUTS PLANNED

The corporation reports to Parliament through Conservative Transport Minister Lisa Raitt, who said in a statement she supports Canada Post’s efforts to cut its losses.

Canada Post employs around 55,000 people and the changes will involve a cut of 6,000 to 8,000 staff, mainly through attrition.

“With its current labor costs, Canada Post has a much higher cost structure than its competitors in the private sector have. This is simply not sustainable,” the corporation said in a statement.

The average annual cost of delivering mail to an address is C$283, compared with C$108 for a community box.

The postal union accused Canada Post of ramming through the changes without enough consultation.

“We recognize that Canada Post needs to change, but this is not the way ... not to cut, cut, cut,” union President Denis Lemelin told reporters.

“We want this press conference to be a call to all the people who want to maintain door-to-door deliveries ... we will stand with them and fight to protect the public service.”

The cost of a single stamp for mail delivery in Canada will rise to C$1 from the current 63 Canadian cents. Such stamps bought in rolls or booklets will cost 85 Canadian cents each.

Canada Post will also open more franchise postal outlets in stores, streamline its operations by using modern technology and cut labor costs. The measures combined are designed to save C$700 million to C$900 million a year.

Canada Post said the changes would return it to financial sustainability by 2019.

Separately, the government said it would give Canada Post a four-year break from the requirement to make special payments to its employee pension plan to address the plan’s shortfall. Canada Post had been due to make a payment of C$1.1 billion in 2014.